Sun Microsystems Reports Record Second Quarter Revenues and Earnings
Second Quarter Earnings Grew 60% on Revenue Growth of 44%

PALO ALTO, Calif., Jan. 18 /PRNewswire/ --
Sun Microsystems, Inc., (Nasdaq: SUNW), a leading provider of hardware,
software and services that power the Internet, today reported results for the
second quarter of fiscal year 2001, which ended December 31, 2000.
Revenues for the second quarter were $5.115 billion, up 44 percent
compared with the second quarter of fiscal 2000. Orders for the second
quarter were $4.953 billion, representing a year over year increase of
32 percent. Net income for the second quarter was $552 million, up 56 percent
compared with last year's net income of $354 million (excluding gains on the
sale of equity investments and acquisition-related charges for fiscal year
2001). Second quarter earnings per share was $0.16, an increase of 60 percent
compared with $0.10 per share for the same period a year ago (excluding gains
on the sale of equity investments and acquisition-related charges for fiscal
year 2001).
During the second quarter of fiscal 2001, Sun completed the acquisition of
Cobalt Networks, Inc. for $2.061 billion in Sun common stock and stock
options. Sun recognized during the second quarter of fiscal 2001
approximately $130 million in accounting charges related to this acquisition
or $0.04 per share, on an after tax basis.
Including gains on the sale of equity investments and acquisition related
charges, reported net income for the second quarter of fiscal 2001 was
$423 million or $0.12 per share, compared with $354 million or $0.10 per share
for the same period a year ago.
For the first six months of fiscal 2001, Sun reported revenues of
$10.160 billion, up 52% over the corresponding period a year ago. Net income
was $1.062 billion or $0.31 per share, compared with net income of
$629 million or $0.19 per share for the first six months of fiscal 2000,
increases of 69% and 63%, respectively (excluding gains on the sale of equity
investments and acquisition-related charges for fiscal years 2000 and 2001).
Including gains on the sale of equity investments and acquisition related
charges, reported net income for the first six months of fiscal 2001 was
$933 million or $0.27 per share, compared with $625 million or $0.19 per share
in fiscal 2000.
"Even with the market dynamics the way they are, we still gained more
market share this quarter than in previous quarters," said Scott McNealy,
Chief Executive Officer of Sun Microsystems. "The numbers continue to tell
the story, regarding customer acceptance of our products, service and support
on a global basis."
McNealy added, "Our new UltraSPARC(TM) III based system products are
rolling out in volume. Recently, we formally announced a new line of server
appliance products as well as an extension to the Netra(TM) product family,
the Netra(TM) X1, the first Solaris(TM) server incorporating the Sparc(TM)
Microprocessor, selling for under $1000. In addition, we announced the Sun
StorEdge(TM) T3 array support for the Windows, NT, HP-UX, IBM AIX, and Linux
system platforms."
McNealy concluded, "With our geographically diversified base and our
leading market position, we are poised to take advantage of the market
opportunities available to us. Current market conditions will clearly separate
the leaders from the followers."
Michael E. Lehman, Sun's Executive Vice President of Corporate Resources
and Chief Financial Officer, commented, "In a quarter that was a clear example
of the volatile dynamics of our industry, our team really delivered like no
one else in the industry can." Lehman added, "The strength of our world wide
business was clearly evident with significant revenue growth in all of our
major geographies, particularly Europe and many parts of Asia."
Lehman concluded, "Going forward, we have not changed our message
regarding our intention to invest aggressively for market share while, at the
same time, delivering on our commitment to generating competitive earnings for
our shareholders."
Sun has scheduled a conference call today to discuss its earnings for the
second quarter of fiscal 2001 at 1:30 p.m. (PST), which is being broadcast
live at www.sun.com.
All references to earnings per share set forth in this press release are
diluted earnings per share as defined within Statement of Financial Accounting
Standards No. 128.
This news release contains forward-looking statements, including
statements relating to Sun's expectations to take advantage of market
opportunities and its position in the market and Sun's intentions to invest
for market share while delivering competitive earnings, which are based on
current expectations that involve risks and uncertainties. Sun's actual
results may differ materially from the results discussed in these
forward-looking statements. Factors that might cause such a difference
include risks related to adverse changes in general economic conditions,
failure to reduce costs, lack of success in technical advancements, the timely
development, production and acceptance of new products and services, and Sun's
ability to compete in the highly competitive and rapidly changing marketplace.
These and other risks are detailed from time to time in Sun's periodic reports
filed with the Securities and Exchange Commission, including, but not limited
to, its annual report on Form 10-K for its fiscal year ended June 30, 2000 and
its quarterly report on Form 10-Q for the quarter ended October 1, 2000.
Since its inception in 1982, a singular vision -- "The Network Is The
Computer(TM)" -- has propelled Sun Microsystems, Inc. to its position as a
leading provider of industrial-strength hardware, software and services that
power the Internet and allow companies worldwide to dot-com their businesses.
With $15.7 billion in annual revenues, Sun can be found in more than
170 countries and on the World Wide Web at http://www.sun.com .
NOTE: Sun, Sun Microsystems, the Sun logo, Sun StorEdge, Solaris, Netra
and The Network is The Computer are trademarks or registered trademarks of Sun
Microsystems, Inc. in the United States and other countries. All SPARC
trademarks are used under license and are trademarks or registered trademarks
of SPARC International, Inc. in the United States and other countries.
Products bearing SPARC trademarks are based upon an architecture developed by
Sun Microsystems, Inc.
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME*/**
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
(unaudited) (unaudited)
Dec. 31, Dec. 26, Dec. 31, Dec. 26,
2000 1999 2000 1999
Net revenues 5,115,000 3,554,000 10,160,000 6,700,000
Costs and expenses:
Cost of sales 2,671,000 1,719,000 5,286,000 3,232,000
Research and development 497,000 398,000 987,000 755,000
Selling, general and
administrative 1,236,000 941,000 2,478,000 1,835,000
In-process research and
development 71,000 71,000 4,000
Total costs and expenses 4,475,000 3,058,000 8,822,000 5,826,000
Operating income 640,000 496,000 1,338,000 874,000
Interest income, net 91,000 32,000 166,000 61,000
Gain on sale of investments 1,000 1,000
Income before income taxes 732,000 528,000 1,505,000 935,000
Provision for income taxes 309,000 174,000 572,000 310,000
Net income 423,000 354,000 933,000 625,000
Net income per common
share - basic 0.13 0.11 0.29 0.20
Net income per common
share - diluted 0.12 0.10 0.27 0.19
Shares used in the
calculation of net income
per common share - basic 3,229,000 3,148,000 3,217,000 3,128,000
Shares used in the
calculation of net income
per common share - diluted 3,430,000 3,382,000 3,433,000 3,354,000
* On October 19, 1999, Sun completed its merger with Forte Software, Inc.
This merger was accounted for as a pooling of interestsand,
accordingly, historical consolidated financial statemements of Sun have
been restated to include Forte for all periods.
** Share and per share amounts for all periods presented have been
adjusted to reflect two-for-one splits (effected in the form of stock
dividends) through December 31, 2000.
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME*/**
EXCLUDING ACQUISITION-RELATED CHARGES AND
GAIN ON SALE OF INVESTMENTS
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
(unaudited) (unaudited)
Dec. 31, Dec. 26, Dec. 31, Dec. 26,
2000 1999 2000 1999
Net revenues 5,115,000 3,554,000 10,160,000 6,700,000
Costs and expenses:
Cost of sales 2,668,000 1,719,000 5,283,000 3,232,000
Research and development 497,000 398,000 987,000 755,000
Selling, general and
administrative 1,204,000 941,000 2,446,000 1,835,000
Total costs and expenses 4,369,000 3,058,000 8,716,000 5,822,000
Operating income 746,000 496,000 1,444,000 878,000
Interest income, net 91,000 32,000 166,000 61,000
Income before income taxes 837,000 528,000 1,610,000 939,000
Provision for income taxes 285,000 174,000 548,000 310,000
Net income 552,000 354,000 1,062,000 629,000
Net income per common
share - basic 0.17 0.11 0.33 0.20
Net income per common
share - diluted 0.16 0.10 0.31 0.19
Shares used in the
calculation of net income
per common share - basic 3,229,000 3,148,000 3,217,000 3,128,000
Shares used in the
calculation of net income
per common share - diluted 3,430,000 3,382,000 3,433,000 3,354,000
Adjustments to net income
under GAAP:
In-process research and
development 71,000 71,000 4,000
Gain on sale of investments -1,000 -1,000
Acquisition-related charges
for Cobalt Networks, Inc. 35,000 35,000
Acquisition-related tax 24,000 24,000
Total adjustments 129,000 129,000 4,000
* The above Normalized Condensed Consolidated Statements of Income are
Presented for illustrative purposes only and are not prepared in
accordance with generally accepted accounting principles.
** On October 19, 1999, Sun completed its merger with Forte Software, Inc.
This merger was accounted for as a pooling of interests and, accordingly,
historical consolidated financial statemements of Sun have been restated
to include Forte for all periods. Share and per share amounts for all
periods presented have been adjusted to reflect two-for-one splits
(effected in the form of stock dividends) through December 31, 2000.
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Dec. 31, June 30,
2000 2000
ASSETS (unaudited) (audited)
Current assets:
Cash, cash equivalents and short-term
investments 2,140,000 2,475,000
Accounts receivable, net 3,215,000 2,690,000
Inventories 792,000 557,000
Other current assets 1,593,000 1,155,000
Total current assets 7,740,000 6,877,000
Property, plant and equipment, net 2,382,000 2,095,000
Long-term investments 5,302,000 4,496,000
Other assets, net 2,656,000 684,000
18,080,000 14,152,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 2,000 7,000
Accounts payable 1,219,000 924,000
Accrued liabilities 2,339,000 2,117,000
Income taxes payable 134,000 422,000
Deferred revenues and customer deposits 1,454,000 1,289,000
Total current liabilities 5,148,000 4,759,000
Long-term debt and other obligations 2,183,000 2,084,000
Stockholders' equity 10,749,000 7,309,000
18,080,000 14,152,000
* On October 19, 1999, Sun completed its merger with Forte Software, Inc.
This merger was accounted for as a pooling ofinterests and, accordingly,
historical consolidated financial statemements of Sun have been restated
to include Forte for all periods.